Examples of the Agnetic℠ Symbiotic Sustainable Agriculture Model Difference:
A simple way to illustrate the sporadic timelines found in agriculture, is this table's chronological order.
Notice how more than one client has a go-stop-go again pattern?
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Stage-gate Constraint |
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National Company: Organic Food Company “A” (2004, 2006, 2008, 2010) |
Natural’ food branding eroding ‘Organic’ food brand value
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“The second drawback is that the stage-gate system assumes that the proposed strategy is the right strategy.”1 Because management (founders all) perceived new and old customers believed in ‘organic’ as much as they did, management blind to inroads made by competitor's ‘organic enough’ products. -------------------------- “Discovery-driven planning shines a spotlight on the place where senior management needs illumination— the assumptions that constitute the key uncertainties.1 |
After pilot project, technologist received an Agnetic℠ Five Domain Assessment revealing why meat company’s preservation of capital for those activities that lead directly to selling their products (making money, rather than just ‘saving money’) logic was explained to the technologist. |
Entrepreneur merged with slightly larger company to gain the balance sheet critical mass necessary to capitalize future projects. Future marketing would be more direct ‘take it or leave’ momentum building positioning, starting with single gasifier projects to smaller meat companies. New go-to-market strategy and actions implemented to smaller meat companies. Technologist no longer relying on customer’s credit rating and balance to fund technology innovation. |
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Local Firm: Traditional Local Grain Firm (2005) |
Grain manager given “make higher value products out of our commodity corn without spending a dime.”
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“Focusing Myopically on Earnings per Share”1 Which for this local firm run by family farmers translated into ‘doing anything that does not directly make our families money’. -------------------------- Hidden Value found in corn stream protein variation |
An Agnetic℠ inbound corn stream quantitative analysis identified previously hidden protein/starch variance that could be controlled to capture premium corn prices.
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Despite three local hog farmers offering $0.15 to $0.15 per bushel premium for ‘protein dense’ corn, Local Grain Firm’s Board of Directors decided against implementing ‘no cost’ product differentiation project because ‘it gave too much value & power in the firm and not on their farms.’ $600,000 per year in net margins representing a 300% increase, not captured.
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Individual
Wage Earner: Food Safety Auditor for Regional produce company (2005, 2007 to present) |
Family run farming and processing company’s power structure being overrun by escalating food safety, supply chain and organic audit requirements.
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“Focusing Myopically on Earnings per Share”1 Which for this family run firm translated into ‘not spending a dime on anything that does not directly make us money’. -------------------------- Real-time, same-time, cross-functional team meetings leads to quicker and lower cost audits |
Agnetic℠ Residency Program provided client ability to execute a series of personal power building interrelated “go now, pause now’ strategies executed in step with employer’s sporadic time line.
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Auditing compliance rating moved from 80% range to consistent 95% +. New grower acquisition timelines dropped by 25%; New grower audit compliance rate consistently 97%. 3 new markets with larger volume customers acquire; Higher gross and net revenues achieve. |
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National Company: Biofuels (Multi-Plant Ethanol Manufacturer) (2005, 2007 - 2009) |
Financial Domain: “The use of discounted cash flow (DCF) & net present value (NPV) to support aggressive growth strategy.” 1 2001 – 2005 = 1 plant8,9,10 2005 – 2008 = 15 more plants8,9,10 “Discounting a future stream of cash flows into a “present value” assumes that a rational investor would be indifferent to having a dollar today or to receiving some years from now a dollar plus the interest or return that could be earned by investing that dollar for those years.” 6 Social Domain: Assumed the present health of the company will persist. |
Financial Domain: Chose to execute exotic, proprietary, hard to trade, over-the-counter corn pricing derivatives, rather than to curtail growth plans. Logistical Domain: Failed to invest in supply chain management programs designed to offset reverberating negative feedback pricing loops inherent with ‘commodity in/commodity out’ business model -------------------------- Hidden Value found in corn stream protein variation |
Potential Client Rejected Agnetic’s℠ Symbiotic Modulations—No services rendered. Unexpected System failure: Bankruptcy, 16 ethanol plants sold at auction All 16 plants positioned on same unstable business model. |
Had the client accepted and implemented Agnetic’s℠ Solutions the following net results could have been obtained: Operationally: Adapting management practices to biomarker data generating networked Near Infrared grain analyzers, early adoption of Agnetic’s℠ recommended corn stream protein/starch bifurcation, Potential Client would have produced 3% more ethanol per year 2005 – 2008. 2004 = 3 plants =9 million more gal of ethanol = $4.5M* 2005 = 3 plants = 9 million more gal of ethanol = $15.75M 2006 = 3 plants = 9 million more gal of ethanol = $18.0M 2007 = 9 plants = 27 million more gal of ethanol = $40.5M 2008 = 16 plants = 48 million more gal of ethanol = $96.0M Business Model Formation: New product (high concentrate whole corn via unit trains) formation though corn stream bifurcation before 2007-2008 expansion would have created strategic profit builder by building outbound protein corn unit train loading facilities designed to accommodate and profit from competing export food grain channels. At 2005 Level: 3 plants = 228M total bushels with 114M to ethanol, 114M to protein whole corn product at $0.40 per bushel margin (Agnetic estimate) = $45.6M; At 2008 Level: yearly additional profit estimate = 16 plants,1.2B bushels of corn, 600M to ethanol, 600M to protein corn, providing $243M yearly profit. Strategically: Management would have been more aware of related grain supply chain’s bull-whip effect on VeraSun’s corn supply chain caused by the huge number of humans rushing into middle class would have on the its food/biofuel supply chain. In turn, management would have bee proactive in establishing Asian based corn protein by-product partners. Like POET and other domestic. *Ethanol Prices18 2004 @ $0.50; 2005 @ $1.75, 2006 @ $2.00; 2007 @ $1.5; 2008 @ 2.00 |
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Small Business Owner: Organic Seeds (2007, 2010 - Present) |
Old business model under pressured by: 1) New organic labeling and food safety tracking, tracing and auditing requirements. Increasing pace of industry price changes Growing capital requirements |
“Traditional stage-gate planning obfuscates the assumptions and shines the light on the financial projections.”1 -------------------------- “Discovery-driven planning shines a spotlight on the place where senior management needs illumination— the assumptions that constitute the key uncertainties.”1 |
Agnetic℠ Residency provides illumination and resolution to client’s intracompany social domain constraints. Client’s outward noticeable pick up in decision-making moves aligned venders to include client in new business |
Accounts payables reduced from X to 0.3X 25% Increase in sales over traditional markets 3X Reduction in time of intracompany workflow activities 4X Increase in market growth potential Owner moved beyond ‘too busy to put out fires’ to ‘getting things done’ by delegating |
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Domestic Affiliate of Global Private Equity Investor: Anaerobic digesters (2007 to present) |
Global sovereign wealth fund management charges USA based affiliate personal with leading global renewable energy and carbon footprint reducing investments. Which in turn will be scaled globally.
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“....But proposals to create growth by exploiting potentially disruptive technologies, products, or business models can’t be bolstered by hard numbers. Their markets are initially small, and substantial revenues generally don’t materialize for several years. ”1 -------------------------- “Discovery-driven planning shines a spotlight on the place where senior management needs illumination— the assumptions that constitute the key uncertainties. More often than not, failure in innovation is rooted in not having asked an important question, rather than in having arrived at an incorrect answer.”1 |
Agnetic℠ worked with domestic key personal to lift up to global mangers: Fractionated market with multiple competing technologies, each failing to meet financial targets because of over-reliance on too few products and one product in particular—electricity. Domestic affiliate able to demonstrate how desired ‘carbon credit trading’ was not, and would not materialize at same rate as faster moving digester technology. |
Global management shifted to investments that stood on their own profitability, rather than carbon certificate value. Realization anaerobic digester is simply an enabling platform from which to launch multiple interrelated higher margin end products depending on local feedstock availability. Using Agnetic’s℠ Symbiotic Ag Model reach five domain set point, from which to add aligned interconnected biomaterial producing process, like tobacco protein extraction. Net Result: Project funding obtained, early stage technology validation implemented; requests for proposals issued. |
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Regional Engineering Firm: Tractor-trailer mounted biomass gasification technology that converts poultry litter into steam, electricity and organic fertilizer (Poultry litter, et al.) (2009, 2010 to present) |
Technologist’s business model assumed customer would use their own capital and credit rating to support the new technology. Entrepreneur hosted 11 month fully operational pilot project at multinational meat company. Technology’s ability to preform accepted. |
“The stage-gate system is not suited to the task of assessing innovations whose purpose is to build new growth businesses,...”1 To make a deal, the meat company insisted to sole rights to the technology. Project died. -------------------------- “Discovery-driven planning shines a spotlight on the place where senior management needs illumination— the assumptions that constitute the key uncertainties.” 1 Preservation of Capital: Had the technologist started with Agnetic, pilot project would not have been sponsored by technologist. |
Extended Agnetic℠ Residency Program lead to management’s realization proactive commercial measures needed to protect ‘organics’ authenticity.
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Client initiated industry rule changing move: * First ever premium bidding for whole grain attributes (protein, etc.) for both non-gmo and protein content. (This is ‘the carrot’ half. ‘The follow-up ‘the stick’ half appears later in this table.) New organic crop production collaboration models begin to form, similar to the Microsoft—Intel Model. |
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Entrepreneur: Ag industry inventor seeking to introduce tractor-trailer mounted multi-fuel (methane, natural gas, other) ammonia synthesis into nitrogen fertilizer technology (2008, 2010 - 2011) |
Nitrogen fertilizer market dominated by single integrated industrial power house’s single large scale ammonia synthesis plant’s economics of scale and cheap unit train railroad rates. In contrast, client’s offering is utilizes a distributive model based on multi-plants and multi-new providers using new technology delivering competing products based on smaller carbon footprint, more local jobs and local control of model. |
Project’s disruptive technology business model did not fit agriculture industry’s conventional step-by-step stage-gate model’s financial projections format. Financial Industry meltdown of 2008-2010 dried up funding sources ------------------ “Discovery-driven planning shines a spotlight on the place where senior management needs illumination— the assumptions that constitute the key uncertainties.” 6 Found ‘unconventional’ funding source willing to “...shine a spotlight…” 6 |
From the beginning, the project’s lead architect used Agnetic’s℠ Model to systematically identify the quality and the connections of the project’s five domains and how they change over time. Enabled project to preserve cash and keep pace with the sporadic timelines found in Ag systems. |
After two years of dormancy, project funded after disruptive technology and innovative food company’s readiness to invest coincided. Startup funding and credit line extension provided by global food company seeking sustainable agriculture project to lower carbon footprint. Successfully weathered ‘vanguard’ stage to ‘business rule changing’ stage. Project is template for follow-through live carbon economy new to Ag industry business model formation projects. |
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Global Private Equity Firm: Ethanol Industry Roll-up (Multiple Facilities) (2008 - 2009) |
Global Private Equity Firm: Ethanol Industry Roll-up (Multiple Facilities) (2008 - 2009) |
“The second drawback is that the stage-gate system assumes that the proposed strategy is the right strategy.”1 ------------------ “Okay. So we all know this is how good the numbers need to look. What set of assumptions must prove true in order for these numbers to materialize?”1 |
Agnetic’s℠ Symbiotic Ag Model Design report highlighted the efficiencies, critical path timeline and cost reductions by retrofit $200 Mil. Revenue ethanol plants into $600 Mil Revenue multi-product biorefineries Innovative Modular Model |
Projected free cash flow: Year 1: $0.0 on zero revenues Year 2: $1.5 Bil on $2.6 Bil revenues Year 3: $1.5 Bil on $2.6 Bil revenues Year 4: $2.1 Bil on $4.4 Bil revenues Year 5: $2.6 Bil on $4.4 Bil revenues Year 6: $10.5 Bil on $17 Bil revenues* (Year 6 is when accumulating benefits of previous retrofitting & higher margins from new product sales coincide.) |
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Global Logistics Firm: (Shipping (Containers) (2010) |
Global shipping company’s executives had two problems: The affiliate grain procurement systems they put into place 10 year prior, were positioning themselves against their global parent. Net result: Client’s own affiliate systems no better at price and procurement for parent company than buying direct from global competitors. 2) Global competitors controlled competing bulk grain logistics systems have no incentive to help a container company |
First, project teams generally know how good the projections (such as NPV) need to look in order to win funding, and it takes only nanoseconds to tweak an assumption and run another full scenario to get a faltering project over the hurdle rate. ------------------ “ So we all know this is how good the numbers need to look. What set of assumptions must prove true in order for these numbers to materialize?” |
Agnetic’s℠ Symbiotic Ag Systems Design process highlighted Key connections between client’s five domains that brought to light previously hidden assets and capabilities not previously identified. Bulk grain competitors exploitable weak flank Wisdom to becoming basic in feedstuffs and foodstuffs origination, give today’s global economic conditions. |
One million ton, $6.0 Bil projected revenue adaptable grain procurement and logistics company designed to systematically: Generate revenue and profits from grain shipments throughout Asia from what was huge expense generated by deadheading empty containers. Capture pricing opportunities by shifting empty container aggregation to different regions to capture seasonal supply & demand imbalances across several grains, oilseeds, etc. Written plan enough to bring affiliates into line. |
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National Firm: Organic Food Company “A” (2011) |
Upstream supply chain participants not moving fast enough to protect ‘organic’ branding from ‘natural’ brand attack. “Carrot only’ approach, not effective enough, fast enough. |
“Using fixed and sunk costs unwisely”1 ------------------ “When a project enters a new stage, the assumptions checklist is used as the basis of the project plan for that stage. It is a plan to learn—to test as quickly and at as low a cost as possible whether the assumptions upon which success is predicated are actually valid.” |
Using Agnetic’s℠ Model, client challenged organic crop production industry’s assumption that non-genetically engineered seeds were ‘good enough’. Client took own initiative to move reluctant supply chain participant’s actions faster |
Client initiated organic industry’s first ever requirement that all organic field crop production in its supply chain be of 100% organic seed origin.
Client also laid out an organic industry first, five year transition plan for supply chain participants to comply with. Noncompliance means expulsion. This is The Stick to the 2010’s Carrot. |
* “Innovation Killers”, by Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih, Harvard Business Review, January, 2008 magazine issue, http://hbr.org/2008/01/innovation-killers/ar/1, accessed September 29, 2010, $6.95 purchase required for full text.
See even more examples in Appendix B of our white paper: "Cracking The Agriculture System Cash Flow Code".